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• eBook-Kapitel aus dem Buch Accounting Fraud

  Case 7: Waste Management (1997)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Accounting Fraud in U.S. Companies 55 Case 7: Waste Management (1997) The Waste Management case provides an anatomy of an accounting… …portrays an accounting fraud perpetrated by the highest-ranking officers at WMI. As the scheme unravelled in 1997, the news sent WMI’s stock value tumbling… …material and that Andersen could issue an unqualified audit opinion on the com- pany’s 1993 financial statements. In 1994, WMI continued to engage in the ac-… …client”. It indicated that WMI actively managed re- ported results, had a history of making significant fourth quarter adjustments, and was in an industry… …agement’s netting of the gains and charges and the lack of disclosures. We have communicated strongly to management that this is an area of SEC exposure. We… …company had previously worked as an auditor at Andersen. – During the 1990s, 14 former Andersen employees worked for WMI, most often in key financial… …typed up an agreement that laid out 32 changes in prac- tices that WMI would have to undertake over time to make its finances more truth- ful. The signed… …complaint, WMI and its outside auditor constituted an agreement to cover up past frauds by committing additional frauds in the future. The SEC believed that… …management consistently refused to make these adjustments. Instead, WMI secretly entered into an agree- ment with Andersen to write off the accumulated… …paid by an audit firm in an enforcement action brought by the SEC. Besides, three audit partners were fined individually. Some believe that Andersen…

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  A Practice Aid for Company Executives: The Ethics Barometer

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …management team have a clear picture of the ethi- cal issues occurring at all levels of the organization. But to develop a sophisticated understanding of an… …confidential questionnaire among staff that measures the extent to which unethical conduct occurs within an organization, and what employee atti- tudes are… …, everyone takes the existing stan- dards of conduct seriously. B.5 In my immediate working environment, an atmosphere of mutual trust pre- vails… …German) KPMG: The Integrity Thermometer – A diagnostic instrument for measuring and developing an organization’s ethics and integrity, www.kpmg.be, 2009…

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  Case 2: ZZZZ Best Company (1987)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …teen-age millionaire. But only a few people saw, or wanted to see, that his business scarcely existed. The story of Barry Minkow is an insightful account… …of how an amoral individual still in his teens was able to sell what one journalist called a “hologram” of a corporation to Wall Street. Barry… …on the back of the Internet boom. Within weeks, ZZZZ Best shares soared from an initial offering of USD 4 to USD 18. Barry Minkow retained a 53%… …controlling interest in ZZZZ Best, and this made him an instant multi-millionaire on paper. By March 1987, Minkow’s shares were worth USD 64 million, and a… …to take a company public in American financial history. During an appear- ance on the Oprah Winfrey Show in April 1987, Minkow encouraged his peers to… …, Minkow dis- missed the auditor and engaged Ernst & Whinney, an international public account- ing firm (now part of Ernst & Young) to perform the following… …. And he fooled the auditors with an act that seemed like Hollywood: he rented half-finished buildings, fixed them up to look like ZZZZ Best work sites… …New York. Eventually, an independent law firm asked for the addresses to all of the company’s restoration jobs. Minkow realized that he could not… …reported USD 100 million. In July 1987, just three months after the company’s stock had reached a market value of nearly USD 220 million, an auction of its… …lawyer portrayed him as an immature teen-ager, who hoped to im- press girls and got involved with the wrong people. For his part, Minkow contended he was…

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  Case 29: Infomatec (Germany, 2000)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Accounting Fraud in European Companies 177 Case 29: Infomatec (Germany, 2000) Infomatec, an Augsburg-based maker of interactive TV… …fictitious large-scale orders. For example, in May 1999, at the peak of the new-economy bubble, Infomatec published an ad-hoc-disclosure, announcing the… …ad-hoc-disclosures are by no means intended only for an investment and sector-specialized audience, but rather for all present or potential investors and… …a competitor and simply garnished with an Infomatec logo. Finally, the company’s core software product allegedly never possessed many of the… …characteristics and functionalities professed in the prospectus and corporate literature. In September 2000, the district attorney’s office began an official… …of an important development. For the first time in Germany, the board members of a cor- poration were held personally liable for supplying…

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  A Practice Aid for Auditors: Fraud Interviews – An Inquiry Guide

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Appendix: Practice Aids 297 Appendix II A Practice Aid for Auditors: Fraud Interviews – An Inquiry Guide Of… …plan and perform every audit with an increased focus on professional scepticism in gathering and evaluat- ing audit evidence. All members of the audit… …Officer / Chief Ethics Officer – Has the company established an ethics code? If so, how was it introduced? Is it a helpful guidance on ethical… …of possible inappropriate changes to estimates, of the failure to consider appropriately all relevant information in determining an estimate, or of… …possible override of controls related to an estimate? Have you ever been told to change an estimate or accounting treatment without an explanation? If so… …any instances where an unauthorized individual gained access to the accounting system? If so, how was the situation resolved? – If someone wanted… …year? Are you aware of any unusual sales terms or conditions associated with sales near the end of the fiscal year? – If an employee was falsifying… …acquire. Each response has to be evaluated: is it relevant, valid and complete? The aim of an interview is getting fraudsters to reveal more than they… …intend. One of the most difficult phases is often commencing an interview. The experi- enced interviewer begins by asking easy, non-sensitive questions… …the process. The body has trouble remaining still. – They subconsciously cross their arms as if to protect themselves from an…

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  Case 34: Royal Ahold (The Netherlands, 2003)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …rocked Ahold, and many critics insisted that the Dutch royal fam- ily rescind the company’s “Royal” designation. “This is pretty big,” said an analyst in… …rigorous performance standards that were imposed on Ahold’s domestic operations. During the 1990s, CEO Cees van der Hoeven had established an overall… …figures shocked Ahold’s new management as much as it did analysts and investors. The company immediately authorized an investigation by law firm White &… …(like many others) did not have a systematic method of accounting for these allowances. The absence of proper internal controls provided an excellent… …at the end of an accounting period). USF executives also provided Ahold’s independent auditors with false and mis- leading information by, for… …confirmations is an important part of the audit process, and the Commission will hold accountable those who work to subvert it.” The USF case was the largest… …USF was “very opaque”. An SEC spokesperson commented: “These auditors had evidence in their hands that could have stopped the fraud in its tracks… …testimony. But Ahold also conducted an extensive internal investigation and even expanded it beyond the fraud at U.S. Foodservice and the improper joint… …venture accounting. The company voluntarily analyzed accounting practices and internal controls at 17 operating units. An SEC enforcement official said… …: “This case is an example of the clear corporate advantage to conducting a comprehensive internal investigation and fully cooperating with the…

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  Case 26: Juergen Schneider (Germany, 1994)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …over mismanagement and fraud emerged in Germany, but the “Schneider case” was by far the biggest. The case is linked to an exceptional bank scandal. In… …rental contracts in an application for a EUR 212 million loan from Deutsche Bank to finance the American-style shopping mall in downtown Frankfurt… …appointed official valuers and that manipulated tenancy agreements were used. However, an independent auditor’s report commissioned by Deutsche Bank after… …interviews with Schneider’s colleagues, aides and business associates suggested that he was less an evil genius and more “a fundamentally megalomaniacal and… …nouveau-riche” figure of the 1980’s. The picture that emerged was that of an entre- preneur who started his company only ten years ago, and was ultimately unable…

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  Case 31: Bankgesellschaft Berlin (Germany, 2001)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …an opaque network of ties between politicians, bankers and company execu- tives in Berlin. Rarely has the close intertwining of business and politics… …. While Berlin’s city-state government owned the majority of BGB’s shares, the new institution was also publicly listed. That made it an unusual hybrid in… …purchaser – an offshore invest- ment vehicle called “Immobilien und Beteiligungen AG” (IBAG), ostensibly based in the Cayman Islands – stood BGB itself. The… …deal was stopped by BaFin, Ger- many’s Federal Banking Supervisory Office. Criminal proceedings were launched against 23 leading BGB officials. An…

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  Chapter 4: Conclusion and Outlook

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …employees in its accounting department. 2. It origins from pressure. In particular, it starts with an environment in which two things are present… …the downfall of entire organizations, the incarceration of the key perpetrators, huge investment losses, significant legal costs, and an erosion of… …; spotting the indicators (“red flags”) that call for immediate scrutiny Fraud Deterrence: Creating an environment where people are discouraged from… …committing fraud; increasing the perceived likelihood that fraudulent acts will be detected, reported and punished Fraud Prevention: Creating an… …, understand and agree to, is an important step. However, merely publicizing the need for integrity won’t bring it about. The code of conduct has to be… …barometer is a good tool for setting the process of “integrity management” in motion. (For further details on how to develop and implement an ethics… …barometer, see Appendix I.) – Senior management must create an appropriate tone at the top and communi- cate the importance of a zero tolerance attitude… …of specific measures to address misconduct. An effec- tive anti-fraud program, however, concentrates on the factors that influence human behaviour in… …Examination: The How, When, and What to Probe, Fraud Magazine, January 2009 Hurt, Christine: Is There an Exit Plan for a Ponzi Scheme? (Did Madoff Have an… …, Berlin 2010, pp. 359–364 Tiscini, Riccardo / di Donato, Francesca: The relation between accounting frauds and corporate governance systems: An…

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  Case 37: Siemens (Germany, 2006)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …faced steep fines unless it cooperated, Siemens hired international law firm Debevoise & Plimpton to work with federal investigators and to conduct an… …International and an internationally recognized anti-corruption expert) as compliance advisor. “Siemens tolerates absolutely no illegal conduct by employees –… …Alexander Bassen said that Pierer probably would not carry out the internal investigation in an appropriate way, because, as former CEO, he might have… …, like Nigeria, but also in countries with reputations for transparency, like Norway. Inside Siemens, bribes were referred to as “NA” – an abbreviation… …black money to foreign officials. However, the most common method of bribery involved hiring an outside “con- sultant” to help “win” a contract. Siemens… …one observer. An insider’s account of corruption at Siemens was provided by Reinhard Siekac- zek, a former sales manager at the telecommunications… …, he oversaw an annual bribery budget of USD 40 million to USD 50 million at the “Com” division. For Greece alone, he budgeted about USD 10 million a… …counts to bribe government officials who awarded Siemens major contracts prior to the 2004 Olympic Games. These contracts included an order for a security… …system as well as an order for the out-dated Athens subway system. In another case, “Com” sales staff paid USD 5 million in bribes to the son of the… …million in bribes to executives at Italy’s Enel S.p.A., in order to secure gas-turbine contracts. Furthermore, prosecutors conducted an investigation…

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